According to the American Library Association's website, Martin Handford's Where's Waldo was one of the top 100 most frequently challenged books between 1990 and 1999. As a kid in the 90's, I remember pouring over the Where's Waldo books on the floor in the living room with my younger brother. Waldo was one of my brother's favorites and that's him dressed as Waldo for Halloween just a few years ago.
Seeing as how the Where's Waldo books have very little words, the offense would likely be in the pictures. After doing some research, the one issue that was mentioned repeatedly, is a topless female sunbather in the beach scene on page 4. In the original edition of Where's Waldo, the side of the women's breast can be seen as she lifts her body from her towel due to a sneaky boy throwing ice cream on her back.
In later editions of the book, the sunbather is given a bathing suit top and the offending breast has been covered. In case you were wondering, the breast measures 1/16 of an inch.